basecarbon

BASE CARBON INC.

AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2024 AND 2023
(EXPRESSED IN UNITED STATES DOLLARS)

KPMG

KPMG LLP
Bay Adelaide Centre
333 Bay Street, Suite 4600
Toronto, ON M5H 2S5
Canada
Tel 416-777-8500
Fax 416-777-8818

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Base Carbon Inc.

Opinion

We have audited the consolidated financial statements of Base Carbon Inc. (the Entity), which comprise:

the consolidated statements of financial position as at December 31, 2024 and December 31, 2023
the consolidated statements of (loss) income and other comprehensive (loss) income for the years then ended
the consolidated statements of changes in equity for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of material accounting policy information

(Hereinafter referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2024 and December 31, 2023, its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of our auditor's report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

© 2025 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

KPMG

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2024. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matters described below to be the key audit matters to be communicated in our auditor's report.

Evaluation of the fair value of investments in carbon credit projects related to the Vietnam Household Devices Project and the Rwanda Cookstoves Project

Description of the matter

We draw attention to Notes 3(a) and 8 to the financial statements. As of December 31, 2024, the Entity has recorded investments in carbon credit projects with a balance of $69,884,068 of which $55,972,343 relates to the Vietnam Household Devices Project and $7,811,725 relates to the Rwanda Cookstoves Project. The investments in carbon credit projects related to the Vietnam Household Devices Project and the Rwanda Cookstoves project are measured at fair value using a discounted cash flow ("DCF") model with the significant assumptions being the carbon credit volumes, carbon credit price, and discount rates.

Why the matter is a key audit matter

We identified the evaluation of the fair value of investments in carbon credit projects related to the Vietnam Household Devices Project and the Rwanda Cookstoves Project as a key audit matter. This matter represented an area of significant risk of material misstatement given the magnitude of the Vietnam Household Devices Project and the Rwanda Cookstoves Project and the high degree of estimation uncertainty in determining the fair value. In addition, significant auditor judgment and involvement of those with specialized skills and knowledge were required in evaluating the results of our audit procedures due to the sensitivity of the fair value of the Vietnam Household Devices Project and Rwanda Cookstoves Project to minor changes in the significant assumptions.

How the matter was addressed in the audit

The primary procedures we performed to address this key audit matter included the following:

We evaluated the carbon credit volumes expected to be generated by the projects by:

Assessing the methodology used to determine the carbon credit volume by comparing it to the applicable Voluntary Carbon Standard ("VCS") administered by Verra (the carbon credit registry)
Checking certain VCS inputs to publicly available resources or comparing to similar projects
Inspecting that Verra has approved the verification requests for carbon credit issuances as disclosed on the Verra Register
Checking the accuracy of the carbon credit volumes based on the revised methodology

We involved valuations professionals with specialized skills and knowledge, who assisted in:

KPMG

Evaluating the carbon credit price by comparing to recent transaction prices for comparable carbon credit methodologies and vintages
Evaluating the discount rates applied by comparing to a discount rate range that was independently developed using publicly available market data for comparable entities and industries and adjusted for asset-specific risk.

Evaluation of the net realizable value of carbon credit inventory

Description of the matter

We draw attention to Notes 3(a), 3(b) and 7 to the financial statements. The carbon credit inventory balance is $25,632,656, which is related to the Rwanda Cookstoves Project. Carbon credit inventory is initially and subsequently measured at the lower of cost or net realizable value.

Why the matter is a key audit matter

We identified the evaluation of the net realizable value of carbon credit inventory as a key audit matter. This matter represented an area of significant risk of material misstatement given the magnitude of the carbon credit inventory and the high degree of estimation uncertainty in pricing inputs in determining the net realizable value of the carbon credit inventory. In addition, significant auditor judgment and involvement of those with specialized skills and knowledge were required in evaluating the results of our audit procedures.

How the matter was addressed in the audit

The primary procedures we performed to address this key audit matter included the following:

We evaluated the carbon credit inventory quantity expected to be generated by the project by obtaining and inspecting third-party evidence of the quantity of the carbon credit inventory as disclosed on the Verra Register.

We involved valuations professionals with specialized skills and knowledge, who assisted in evaluating the carbon credit price by comparing to recent transaction prices for comparable carbon credit methodologies and vintages.

Other Information

Management is responsible for the other information. Other information comprises:

the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

KPMG

We obtained the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditor's report.

If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor's report.

We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

KPMG

We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Entity to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming an opinion on the group financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit. We remain solely responsible for our audit opinion.

KPMG

Determine, from the matters communicated with those charged with governance, those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor's report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

KPMG LLP

The engagement partner on the audit resulting in this auditor's report is Christopher D. Cornell.

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Canada

March 31, 2025

Base Carbon Inc.
Consolidated Statements of Financial Position
(Expressed in United States Dollars)

	Note	December 31, 2024	December 31, 2023
ASSETS
Current assets
Cash and cash equivalents		$ 14,798,726	$ 1,400,682
Short term investments	4	41,687	45,237
Other receivables		18,997	24,747
Related party receivable	5	1,464,274	425,954
Prepaid and other assets	6	48,872	81,529
Carbon credit inventory	7	25,632,656	-
Current investments in carbon credit projects	8	8,816,450	34,813,455
		50,821,662	36,791,604
Non-current assets
Property and equipment		93,480	137,826
Non-current investments in carbon credit projects	8	61,067,618	102,272,786
Investments at fair value	9	85,000	2,041,163
Total Assets		$ 112,067,760	$ 141,243,379
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities		$ 806,044	$ 451,672
Income tax liability	10	936,825	8,311
		1,742,869	459,983
Non-current liabilities
Deferred income tax liability	10	7,253,245	5,984,368
Lease liability		63,216	110,169
Total liabilities		9,059,330	6,554,520
Shareholders' Equity
Share capital	11	$ 48,513,906	$ 51,448,159
Contributed surplus	12	1,813,148	1,654,038
Retained earnings		52,681,376	81,586,662
Total shareholders' equity		103,008,430	134,688,859
Total Liabilities and Shareholders' Equity		$ 112,067,760	$ 141,243,379

The accompanying notes are an integral part of these audited consolidated financial statements.

Approved and authorized on behalf of the Board of Directors:

Director /s/ "Michael Costa"

Director /s/ "Margot Naudie"

Base Carbon Inc.
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
(Expressed in United States Dollars)

	Note	For the years ended
		December 31, 2024	December 31, 2023
Realized cash settled gains on investments in carbon credit projects	8	$ 28,027,107	$ 6,418,271
Carbon credit sales
Carbon credit sales from inventory	7	190,000	-
Carbon credit cost of sales from inventory	7	(268,800)	-
Gross loss on carbon credit sales		(78,800)	-
Operating expenses
Consulting		1,062,201	1,328,085
Professional fees		916,531	1,160,497
Salaries and wages		2,867,160	2,055,587
General and administrative		982,692	693,124
Travel, marketing, and promotion		492,888	638,545
Depreciation		51,019	25,959
Regulatory expenses		63,075	38,253
Insurance		401,954	433,410
Share-based compensation	12	162,035	326,376
Royalty license fee	5	705,996	160,457
Total operating expenses		7,705,551	6,860,293
Operating income (loss) for the period		$ 20,242,756	$ (442,022)
Unrealized (losses) gains on investments in carbon credit projects	8	(45,013,838)	104,684,223
Foreign exchange gain (loss)		(9,998)	17,481
Interest income		147,783	216,148
Interest expense		(25,241)	(852)
Share of loss of investment in associate		-	(208,433)
Loss on investments at fair value	9	(2,041,163)	-
Net (loss) income before income tax for the period		$ (26,699,701)	$ 104,266,545
Income tax expense	10	(2,205,585)	(5,992,692)
Net (loss) income for the period		$ (28,905,286)	$ 98,273,853
Comprehensive (loss) income for the period		$ (28,905,286)	$ 98,273,853
Basic (loss) income per share	13	$ (0.25)	$ 0.82
Basic weighted average number of common shares		114,879,977	120,581,036
Diluted (loss) income per share	13	$ (0.25)	$ 0.81
Diluted weighted average number of common shares		114,879,977	120,927,571

The accompanying notes are an integral part of these audited consolidated financial statements.

Base Carbon Inc.
Consolidated Statements of Cash Flow
(Expressed in United States Dollars)

		For the years ended
		December 31, 2024	December 31, 2023
Cash provided by (used in):
Operating Activities
Net (loss) income for period		$ (28,905,286)	$ 98,273,853
Adjustment for:
Depreciation		51,019	25,959
Share-based compensation	16	162,035	326,376
Unrealized loss (gain) on investment in carbon credit projects	8	45,013,838	(104,684,223)
Foreign exchange (gain) loss		9,998	(17,481)
Loss on investment at fair value	9	2,041,163	-
Share of loss of equity accounted investments		-	208,433
Changes in operating assets and liabilities:
Other receivables		5,750	(18,990)
Related party receivable	5	(1,038,320)	(425,954)
Prepaid and other assets	6	32,657	58,089
Accounts payable and accrued liabilities		354,372	218,142
Income tax liability	10	928,514	8,311
Deferred income tax liability	10	1,268,877	5,984,368
Lease liability		(46,953)	110,169
Investments in carbon credit projects	8	(3,444,321)	(7,930,788)
Net cash provided by (used in) operating activities		$ 16,433,343	$ (7,863,736)
Investing Activities
Short term investment		3,550	(23,129)
Purchase of property and equipment	4	(6,673)	(158,909)
Investment at fair value	9	(85,000)	-
Purchase of subsidiary equity from non-controlling interest	9	-	(1,600,000)
Net cash used in investing activities		(88,123)	(1,782,038)
Financing Activities
Proceeds from exercise of options	12	2,260	-
Repurchase of shares	11	(2,939,438)	(1,889,462)
Net cash used in financing activities		(2,937,178)	(1,889,462)
Increase (Decrease) in cash and cash equivalents		13,408,042	(11,535,236)
Change in cash related to foreign exchange		(9,998)	17,482
Cash and cash equivalents, beginning of period		1,400,682	12,918,436
Cash and cash equivalents, end of period		$ 14,798,726	$ 1,400,682

The accompanying notes are an integral part of these audited consolidated financial statements.

Base Carbon Inc.
Consolidated Statements of Changes in Equity
(Expressed in United States Dollars)

	Attributable to owners of the Company
	Number of Common Shares	Share Capital	Contributed surplus	Retained earnings (deficit)	Non-controlling Interest	Shareholders' Equity
Balance, December 31, 2022	123,339,602	$ 53,337,621	$ 1,327,662	$ (17,004,025)	$ 6,196,408	$ 43,857,666
Net income for the period	-	-	-	98,273,853	-	98,273,853
Stock based compensation	-	-	326,376	-	-	326,376
Shares purchased and cancelled under NCIB	(4,983,920)	(1,749,808)	-	-	-	(1,749,808)
Shares purchased and cancelled under share purchase agreement	(437,500)	(139,654)	-	-	-	(139,654)
Non-controlling interest	-	-	-	316,834	(6,196,408)	(5,879,574)
Balance, December 31, 2023	117,918,182	$ 51,448,159	$ 1,654,038	$ 81,586,662	-	$ 134,688,859
Balance, December 31, 2023	117,918,182	$ 51,448,159	$ 1,654,038	$ 81,586,662	-	$ 134,688,859
Net loss for the period	-	-	-	(28,905,286)	-	(28,905,286)
Stock based compensation	-	-	162,035	-	-	162,035
Exercise of options	13,000	5,185	(2,925)	-	-	2,260
Shares purchased and cancelled under NCIB	(8,695,696)	(2,939,438)	-	-	-	(2,939,438)
Balance, December 31, 2024	109,235,486	$ 48,513,906	$ 1,813,148	$ 52,681,376	-	$ 103,008,430

The accompanying notes are an integral part of these audited consolidated financial statements.

Base Carbon Inc.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

(Expressed in United States Dollars)

1. Nature of operations

Base Carbon Inc. ("Base Carbon" or, the "Company") is a publicly traded entity which is listed on Cboe Canada under the trading symbol "BCBN" and trading on the OTCQX Best Market under the symbol "BCBNF". Base Carbon runs general operations, including its ownership interest in carbon reduction and removal projects, through its wholly owned subsidiary, Base Carbon Capital Partners Corp. ("BCCPC").

Base Carbon, through BCCPC, is in the business of providing capital, development expertise and management operating resources to projects involved primarily in the voluntary carbon markets and the broader environmental markets. The Company seeks to be the preferred carbon project partner in providing capital and developmental resources to carbon projects globally and, where appropriate, will endeavour to utilize technologies within the evolving carbon industry to enhance efficiencies, commercial credibility, and trading transparency.

Base Carbon Inc. (formerly 1287411 B.C. LTD., or "411 BC") was incorporated under the laws of British Columbia on February 3, 2021.

On February 23, 2022, Base Carbon Corp. completed an acquisition of 411 BC through a reverse takeover arrangement (the "RTO Transaction"), whereby 411 BC was the resulting reporting issuer, which then changed its name to Base Carbon Inc. Pursuant to the RTO Transaction, all outstanding common shares of Base Carbon Corp. were exchanged for common shares of Base Carbon on a one-for-one basis and the previous shareholders of 411 BC retained an aggregate of 760,004 Base Carbon Inc. shares.

The principal steps of the RTO Transaction were as follows:

(a) 411 BC effected a continuance from the Province of British Columbia to the Province of Ontario such that its governing corporate legislation is now the Business Corporations Act (Ontario);
(b) in association with the foregoing continuance, 411 BC:
i. changed its name to "Base Carbon Inc.".
ii. authorized preference shares to be issuable in series pursuant to the articles of continuance; and
iii. all directors of 411 BC resigned, and the board was reconstituted with nominees of Base Carbon Corp.
(c) all officers of 411 BC resigned and were replaced with nominees of Base Carbon Corp.
(d) 411 BC consolidated its issued and outstanding common shares on the basis of one post-consolidation share of Base Carbon Inc. for every 5.394708449 pre-consolidation common share; and
(e) Pursuant to a three-cornered amalgamation agreement, Base Carbon Corp. and 1000095223 Ontario Inc., a wholly-owned subsidiary of the Company, amalgamated and retained the name Base Carbon Corp., and (i) the common shares in the capital of Base Carbon Corp. were exchanged for shares of Base Carbon Inc. on a one-for-one basis; and (ii) options to acquire common shares of Base Carbon Corp. became exercisable for Base Carbon Inc. shares on the same terms and conditions and on an economically equivalent basis.

The Company exists under the Business Corporations Act (Ontario). The Company's registered and mailing address is 50 Carroll Street, Toronto, Ontario, M4M 3G3.

2. Basis of preparation

(a) Statement of compliance

These consolidated financial statements (the "financial statements") have been prepared in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee

Base Carbon Inc.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

(Expressed in United States Dollars)

("IFRIC"). Effective January 1, 2024, amendments were made to IAS 1, IAS 7, and IFRS 16. These amendments were adopted in the preparation of the financial statements for the year ended December 31, 2024, and did not result in a material change to the Company's financial statements or policies. Accounting policy for IAS 2 Inventories and IFRS 15 Revenue were introduced during the year ended December 31, 2024.

All other accounting policies are consistently applied for the years ended December 31, 2024, and December 31, 2023.

These financial statements were approved and authorized for issuance by the Board of Directors on March 31, 2025.

(b) Going concern

These consolidated financial statements have been prepared on a going concern basis which presumes that the Company will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the normal course of its operations. Refer to Note 15 - Risk Management – Liquidity Risk for details.

These financial statements have been prepared on a historical cost basis except for the Company's financial instruments, stock options, investments in carbon credit projects, and investments at fair value, which are measured at fair value.

(d) Basis of consolidation

These financial statements include the accounts of the Company and its subsidiary companies after eliminating intercompany balances and transactions. Subsidiaries are entities over which the Company has the power to govern financial and operating policies, generally accompanying a shareholding of greater than 50% of the voting rights.

At December 31, 2024 and 2023, the Company's subsidiaries and consolidation basis are as follows:

Entity name	Functional currency	Place of incorporation	Ownership as at
			December 31, 2024	December 31, 2023
Base Carbon Capital Partners Corp. (BCCPC)	USD	Barbados	100%	100%
Base Carbon Corp.	USD	Canada	100%	100%
Base Carbon (US) Corp.	USD	United States	100%	100%

3. Material accounting policies

(a) Use of judgements and estimates

The preparation of these financial statements require management to make certain judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual outcomes could differ from these estimates.

These financial statements include estimates that, by their nature, are uncertain. The impact of these estimates is pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are

Base Carbon Inc.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

(Expressed in United States Dollars)

based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Judgements made in applying accounting policies that have the most significant effects on the amounts recognized in these financial statements are included in the following notes:

Accounting for investments in carbon credit projects – management assessed the contractual agreements to determine whether the investments in carbon credit projects are financial instruments and their classification and measurement (Note 3(e)).
Accounting for carbon credit inventory – management assessed that the carbon credits from the Rwanda Cookstoves Project are to be valued at the lower of cost or net realizable value (NRV), as the Company is not a commodity broker trader.

Information about assumptions and estimate uncertainties that have a significant risk of resulting in a material adjustment in these financial statements is included in the following notes:

Fair values of investments in carbon credit projects – management estimates the fair value using the cost approach or income approach depending on the stage of the investment in carbon credit project, with such carbon credit investment classified as a financial instrument, the fair value determined by either the cost or income approach is presented through profit or loss (FVTPL) (Note 3(e)).

The cost approach is a valuation technique where fair value approximates the cumulative cash spend at the period end and assessing that the cost per carbon credit has not fallen below the carbon credit price. Projects valued using the cost approach involve significant subjectivity and estimation uncertainty, including the carbon credit price assumption (Note 8).

The income approach uses a discounted cash flow model, summing the future discounted after-tax cashflows generated over the life of the project to a current net present value. The model reflects market expectations based on key inputs and assumptions, namely the carbon credit price, carbon credit volume, and discount rates. Projects valued using the income approach involve significant subjectivity and estimation uncertainty, including assumptions related to the carbon credit price, carbon credit volume, and discount rates (Note 8).

As part of the operational stage of a carbon reduction project, the Company emphasizes the implementation of project management or oversight standards relating to measurement, reporting, verification and auditing to enhance the efficiencies and credibility of carbon credits.

With the exception of carbon credit market pricing inputs attained from a third-party pricing source, the valuation of the Company's projects is performed internally, with the India Afforestation, Reforestation and Revegetation Project ("India ARR Project") using the cost approach, and the Vietnam Household Devices and Rwanda Cookstove Projects valued by the income approach utilizing a "discounted cash flow" analysis.

Initial valuation is performed by the Company's Corporate Development Department, with subsequent assessment and review by the Company's Finance Department. Further review is performed by the Company executives, namely: The Company CEO, President and CFO. Personnel at each stage all possess the requisite qualifications and expertise. The Company believes it has all the necessary internal expertise to coordinate and perform the valuation.

Further oversight is provided by both the Audit Committee and Board of Directors, to whom details of projects are presented for review, and in the case of the Board of Directors, approval.

Base Carbon Inc.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

(Expressed in United States Dollars)

Regarding the third-party involvement, the Company uses a third party to provide data to determine the carbon credit price assumption. The Finance Department reviews documentation provided by that third party to confirm that the pricing source is appropriate for use in the valuation of investments in carbon credit projects.

Carbon credit inventory – management determines the lower of cost or net realizable value (NRV) of carbon credit inventory by estimating the fair value of the carbon credits using the spot price on the date of receipt (i.e. cost) versus the fair value of the credits using the spot price on the reporting date (i.e. NRV). Where it is determined that the spot price at the reporting date is lower than on the date of receipt, an appropriate write-down is made. If there is a subsequent increase in the value of inventory on hand, reversals of previous write-downs to net realizable value are made. The spot price is determined based on pricing inputs provided by a third-party pricing source.

(b) Carbon credit inventory

Carbon credit inventory is initially and subsequently measured at the lower of cost or NRV. In subsequent measurements, any write-down to NRV is recognized as an expense in the period in which the write-down occurs. Any reversal should be recognised in the income statement in the period in which the reversal occurs. Cost of carbon credit inventory received from investments in carbon credit projects is equal to management's estimate of the fair value of the carbon credits using the spot price plus any revenue sharing obligations associated with project agreement and the Government of Rwanda LOA (see Note 8) on the date of receipt.

IFRS 15 Revenue from Contracts with Customers establishes a comprehensive framework for recognizing revenue from contracts with customers. Under IFRS 15, revenue is recognized based on the transfer of control of goods or services to the customer at an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company recognizes revenue from the sale of carbon credits that are received and are initially recognized as inventory. Revenue is recognized upon transfer of control of the carbon credits to customers in an amount that reflects the consideration the Company receives. Revenue from the sale of carbon credits is recorded when the carbon credits have been transferred, and the Company's performance obligation has been satisfied.

(d) Functional and foreign currency translation

The presentation currency of these financial statements is United States dollars. The functional currency of the Company is also the United States dollar. The functional currency for the Company is determined by the currency of the primary economic environment in which it operates. The Company believes that the United States dollar as functional and presentation currency best reflects the current and future operating activities for the Company and will provide shareholders with an accurate reflection of the Company's various business activities. It will also enhance the future comparability of the Company's financial information to its industry peers listed on various global exchanges.

Currency exchange gains or losses on translation are included on the Consolidated Statement of (Loss) Income and Comprehensive (Loss) Income. Transactions denominated in foreign currencies are translated into the entity's functional currency as follows:

Monetary assets and liabilities are translated at the exchange rate in effect at the reporting date.
Non-monetary assets and liabilities are translated at historical exchange rates prevailing at each transaction date.
Deferred tax assets and liabilities are translated at the exchange rate in effect at the reporting date with translation gains and losses recorded in income tax expense; and

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

Revenues and expenses are translated at the average exchange rates throughout the reporting period, except depreciation, which is translated at the rates of exchange applicable to the related assets, and share-based compensation expense, which is translated at the rates of exchange applicable at the date of grant of the share-based compensation.

(e) Financial instruments

Classification

Financial assets are measured at fair value at initial recognition. Financial assets are subsequently measured at fair value through profit or loss (FVTPL), fair value through other comprehensive income (FVOCI) or amortized cost based on the business model for managing those financial instruments and the contractual cash flow characteristics of those instruments.

The Company's investment in the Vietnam Household Devices Project is a financial asset measured at FVTPL using the income approach to determine the fair value of the investment. The contracts are in the scope of IFRS 9, because they are not entered into for the purpose of the receipt or delivery of carbon credits in accordance with the Company's expected purchase, sale or usage requirements and can be settled net in cash by either:

contractually, as the seller has a right or is obligated to pay a pre-agreed price to buy back the carbon credits instead of physical delivery,
entering into offsetting forward sales contract with another party, or
receiving a share of proceeds from sales to a third party instead of physical delivery.

The Company's investment in the Rwanda Cookstoves Project is a financial asset measured at FVTPL using the income approach to determine the fair value of the investment. The contracts are in the scope of IFRS 9, because the Company will take delivery of the contracted carbon credits once issued, and will enter into forward sales contracts with counterparties, or sell to counterparties at prevailing prices for cash settlement.

The Company's investment in the India ARR Project is a financial asset measured at FVTPL using the cost approach to determine the fair value of the investment. The contracts are in the scope of IFRS 9, because the Company will take delivery of the contracted carbon credits once issued, and will enter into forward sales contracts with counterparties, or sell to counterparties at prevailing prices for cash settlement.

Equity instruments are measured at FVTPL, unless the asset is not held for trading purposes, and we make an irrevocable election to designate the asset as FVOCI. This election is made on an instrument-by-instrument basis.

Financial liabilities are initially measured at fair value and are derecognized when the obligations are discharged, cancelled, or expire.

IFRS 9 includes an expected credit loss model for all financial assets measured at amortized cost and debt instruments measured at FVOCI. Expected credit losses are the present value of cash shortfalls over the remaining expected life of the financial asset using either a 12-month expected credit losses or lifetime expected credit losses.

(f) Share based payments

Share based payment are securities instruments that call for settlement by issuing equity instruments, typically common shares, which are granted as an award to employees, contractors or directors. The awards are valued using the Black Scholes option valuation model. The cost is recognized on a graded

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

vesting method basis adjusted for expected forfeitures as an employee, contractor or director expense with a corresponding increase to equity in contributed surplus. Consideration paid by employees, contractors or directors on the exercise of stock options is recorded as share capital.

(g) (Loss) earnings per share

The Company presents basic and diluted (loss) earnings per common shares, calculated by dividing the (loss) earnings attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding are adjusted for the effects of all potential dilutive common shares.

(h) Income taxes

Income tax comprises current and deferred tax. Income tax is recognized in the Consolidated Statement of (Loss) Income and Comprehensive (Loss) Income except to the extent that it relates to items recognized directly in equity, in which case the income tax is also recognized directly in equity.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous periods.

In general, deferred tax is recognized in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the statement of financial position date and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered.

Deferred income tax assets and liabilities are presented as non-current.

(i) Investment in associate

As at December 31, 2022, the Company recognized Hardwick Climate Business Limited ("HCBL") as an investment in associate under IAS 28. On May 10, 2023, the Company completed a restructuring transaction with HCBL, whereby the Company sold and reduced its equity ownership in HCBL from 49.9% to 15% and held no significant influence. As a result, effective May 2023, the Company discontinued its equity accounting treatment of the investment in HCBL and recognized the investment in HCBL as investment at fair value. Refer to Note 9 – Investments at fair value for details of the restructuring transaction.

(j) Investments in carbon credit projects

Investments in carbon credit projects are classified and measured as financial instruments measured at FVTPL (refer to Note 3(e)). During the years ended December 31, 2023 and 2022 the Company entered into investments in carbon credit projects that will be primarily net settled in cash as described in Note 8 – Investment in carbon credit projects. Refer to note 3(e) for details of delivery and settlement.

The Company uses valuation techniques appropriate in the circumstances and for which sufficient data are available to measure fair value, while maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

The objective of using a valuation technique is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants and the measurement date under current market conditions.

The three widely used valuation techniques are:

i) market approach – uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets and liabilities
ii) cost approach – reflects the amount that would be required currently to replace the service capacity of an asset (current replacement cost)
iii) income approach – converts future amounts (cash flows or income and expenses) to a single current (discounted) amount, reflecting current market expectations about those future amounts.

In some cases, a single valuation technique will be appropriate, whereas in others, multiple valuation techniques will be appropriate.

During the year ended December 31, 2024, in accordance with IFRS 13 Fair Value Measurement, the Company assessed and determined that based on significant carbon credits issued, the valuation technique for the Rwanda Cookstoves Project should be changed from the cost approach to the income approach. The income approach uses a discounted cash flow model, summing the future discounted after-tax cashflows from the lifetime of the project to a current net present value. The model reflects market expectations based on key inputs and assumptions, namely the carbon credit price, carbon credit volume, and discount rates. The gains from the remeasurement of investments in carbon credit projects were recorded in the "Unrealized (loss) gains on investments in carbon credit projects" line in the Consolidated Statement of (Loss) Income and Comprehensive (Loss) Income.

As at December 31, 2024, the fair value of investment in the India ARR Project was determined using the cost approach, as the project has not yet generated carbon credits project.

Investments in carbon credit projects are disclosed as current assets if the project has generated carbon credits as at the reporting date and management expects carbon credits from such projects to be realized within 12 months of the reporting date.

4. Short-term investments

As at December 31, 2024, short-term investments of $41,687 are Guaranteed Investment Certificates ("GIC") that the Company holds in a Canadian bank to provide cash collateral on corporate credit cards. The GICs are in two CAD accounts that are restricted for use and used as collateral to secure against the Company's credit cards. The terms of the GICs are as follows:

Balance	Investment Date	Maturity Date
$20,843	September 13, 2024
(Renewed from 2023)	September 13, 2025	2.25% per annum
$20,844	October 10, 2024
(Renewed from 2023)	October 10, 2025	2.45% per annum

The Company recognizes the GICs at fair value with changes in fair value recorded through the Company's statements of (loss) income and comprehensive (loss) income. The GICs are classified as Level 1 in the fair value hierarchy. During the year there were no transfers of assets between Level 1, Level 2 and Level 3.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

5. Related party receivable

Abaxx Technologies Inc.

Abaxx Technologies Inc. ("Abaxx"), a related party to the Company, owned approximately 17.7% of the Company's outstanding shares as at December 31, 2024 (16.4% as at December 31, 2023). Abaxx and the Company also have two common board of director members. In September 2021, a technology, IP and royalty agreement was executed between Abaxx and the Company, whereby the Company would owe a 2.5% royalty fee payment to Abaxx on Company revenue, including realized cash settlement from the sale of carbon credits.

The table below summarizes movements in the related party receivable balance between December 31, 2023 and 2024:

As at	December 31, 2024	December 31, 2023
Balance, beginning of the period	$ 425,954	$ -
Loan issued	1,000,000	553,773
Repayments	(542,068)	(160,456)
Interest income	30,388	32,637
Payment for share purchase agreement	550,000	-
Balance, end of the period	$ 1,464,274	$ 425,954

In April 2023, the Company issued a loan to Abaxx. Per the loan agreement, the unsecured loan had a principal amount of $553,773 (CAD $750,000), bearing an annualized interest rate of 9%, compounded monthly and was due to mature on October 15, 2023. The annualized interest rate increased to 15% on any amounts of principal or interest not paid by the maturity date. The loan agreement provided that the loan balance could be offset by amounts owed by Base Carbon to Abaxx pursuant to the 2.5% technology, IP and royalty agreement with Abaxx.

During the year ended December 31, 2023, the Company generated $6,418,271 in realized cash settlement from the sale of carbon credits, resulting in an Abaxx royalty fee payable of $160,457. This royalty fee was netted against the loan receivable from Abaxx as at December 31, 2023. As at December 31, 2023, $425,954 was the outstanding loan balance receivable from Abaxx. Interest income of $32,637 was recognized in the year ended December 31, 2023 in relation to the loan.

In January 2024, the Company received approximately $378,000 from Abaxx as a loan repayment from Abaxx, net of an invoice issued by Abaxx for marketing, promotional and consulting services provided to the Company. This payment satisfied the outstanding loan balance which was issued in 2023.

In September 2024, the Company issued an additional $1,000,000 unsecured loan to Abaxx. The loan matures on September 16, 2025, bearing an annualized interest rate of 9%, compounded monthly. The annualized interest rate increases to 15% on any amounts of principal or interest not paid by the maturity date.

During the year ended December 31, 2024, the Company generated $28,027,107 in realized cash settlement from the sale of carbon credits, resulting in a royalty license fee of $705,996 owed to Abaxx. Of this amount, $112,036 was netted against a portion of the second loan balance in December 2024. The remaining royalty license fee of $593,959 was paid by the Company to Abaxx in 2024.

In December 2024, the Company and Abaxx entered into a share purchase and sale agreement whereby the Company agreed to purchase such number of common shares of the Company owned by Abaxx equal to the aggregate purchase price of $550,000 divided by the per share market value on closing, which was

Base Carbon Inc.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

(Expressed in United States Dollars)

expected to occur in January 2025. The purchase price was paid to Abaxx in advance of closing during December 2024. Refer to Note 18- Subsequent events.

As at December 31, 2024, $1,464,274 was the outstanding balance receivable from Abaxx. Interest income of $30,388 was recognized in the year ended December 31, 2024 in relation to the two Abaxx loans.

6. Prepaid and other assets

Prepaid and other assets comprise of prepayments made by the Company, for which the expenses are expected to be incurred within twelve months of the current reporting period. Prepaid and other assets are amortized and expensed during the period the expenses are incurred.

As at	December 31, 2024	December 31, 2023
Balance, beginning of the period	$ 81,529	$ 139,618
Additions to prepaid and other assets in period	66,851	400,891
Recognition of expense in period	(99,508)	(458,980)
Balance, end of the period	$ 48,872	$ 81,529

As at December 31, 2024, the prepaid and other assets balance is primarily comprised of director and officer liability and commercial general liability insurance.

7. Carbon credit inventory

In April 2024, BCCPC received 717,558 carbon credits from the Rwanda Cookstoves Project. The Company considers these carbon credits as inventory held for sale. Based upon the fair market value on the date the carbon credits were received by BCCPC, the 717,558 carbon credits received had a total value of $9,271,207. There was a corresponding transfer from the carrying amount of current investments in carbon credit projects arising from the receipt of the carbon credits valued at $9,271,207.

In July 2024, the Company realized a cash settlement of $190,000 from the sale of carbon credits to a third party. Based upon the fair market value of such carbon credits on the date received by the Company from the Rwanda Cookstoves Project, the carbon credits sold had a total cost of sale of $268,800, inclusive of $15,000 due to DelAgua through the revenue sharing agreement, resulting in a gross accounting loss of $78,800.

In October 2024, the Company received an additional 1,014,635 carbon credits from the Rwanda Cookstoves Project with a total value of $16,268,810 based upon the fair market value on the date received. There was a corresponding transfer in the carrying amount of current investments in carbon credit projects arising from the receipt of the carbon credits valued at $16,268,810.

During the year ended December 31, 2024, the Company added $346,439 to the inventory cost, representing Rwanda Green Fund ("RGF") contributions of $0.20 per credit, for the first 1,925,000 credits from the project, are payable to the United Nations. The $0.20 cost was applied to the 1,732,193 credits received from the project in the year.

As at December 31, 2024, the total inventory was valued at $25,632,656. The Company's carbon credit inventory available for sale and held as at December 31, 2024, consists solely of carbon credits from the Rwanda Cookstoves Project carbon credits. The Company had no carbon credit inventory as at December 31, 2023.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

8. Investments in carbon credit projects

Categorization of current and non-current investment balances in carbon credit projects

The following table summarizes the current and non-current balances of investments in carbon credit projects as at December 31, 2024 and December 31, 2023:

Current Investments in Carbon Credit Projects	December 31, 2024	December 31, 2023
Rwanda Cookstoves Project	$ 2,723,478	$ -
Vietnam Household Devices Project	6,092,972	34,813,455
Total Current Investments in Carbon Credit Projects	8,816,450	34,813,455
Non-Current Investments in Carbon Credit Projects	December 31, 2024	December 31, 2023
Rwanda Cookstoves Project	5,088,247	8,825,000
Vietnam Household Devices Project	49,879,371	89,047,786
India ARR Project	6,100,000	4,400,000
Total Non-current Investments in Carbon Credit Projects	$ 61,067,618	$ 102,272,786

For the Rwanda Cookstoves Project, the current investments balance represents the discounted after-tax cashflows from the sale of carbon credits at fair value expected to be received from the project within the next twelve months of the balance sheet date. The non-current investments balance represents the discounted after-tax cashflows from the sale of the carbon credits expected to be received from the project beyond the next twelve months of the balance sheet date. Also see discussion under the headings "Current and Non-current investment balance for the Rwanda Cookstove Project" and "Unrealized gains on investment in Rwanda Cookstoves Project" below.

For the Vietnam Household Devices Project, the current investments balance represents the discounted after-tax cashflows of the projects expected to be received within the next twelve months of the balance sheet date. The non-current balance represents the discounted after-tax cashflows of the projects expected to be received beyond the next twelve months of the balance sheet date. Also see discussion under the headings "Current and non-current investment balance for the Vietnam Household Devices Project", "Realized cash settled gains on investment in Vietnam Household Devices Project" below and "Unrealized (losses)/gains on investment in Vietnam Household Devices Project" below.

The India ARR Project is not yet in the carbon credit generation stage and is valued at fair value, approximated by cost, and categorized as a non-current investment.

Rwanda Cookstoves Project

On January 25, 2022, the Company, through BCCPC, entered into a carbon reduction project agreement with a subsidiary of the DelAgua Group ("DelAgua"), as in-country project developer, to supply cookstoves in Rwanda. According to the terms of the agreement, BCCPC invested $8,825,000 to fund the manufacturing, distribution and monitoring of approximately 250,000 cookstoves across rural Rwanda in exchange for a revenue sharing agreement with respect to the first 7.5 million carbon credits which are expected to be generated by the project.

In February 2023, DelAgua completed distribution of all 250,000 cookstoves to participating households. During the year ended December 31, 2023, the Company made its final investment of $375,000 into the project. As at December 31, 2023, the project had not yet generated carbon credits and the cost approach was used to determine the fair value of the investment in the project being equal to the total disbursed investment payments of $8,825,000.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

In December 2023, the Government of Rwanda issued a letter of authorization ("LOA") to allow for the application of the concept of a corresponding adjustment pursuant to Article 6 of the Paris Agreement with respect to the Rwanda Cookstoves project. This resulted in Verra, the carbon registry for the project, announcing it had applied its article 6 authorized ("Article 6 Authorized") label to the project, being the first time Verra had applied such designation to a carbon project. According to the LOA, a copy of which may be found on Verra's website under project ID 4150, 2% of any issued Article 6 Authorized labeled carbon credits are to be immediately retired to help offset global emissions, 10% of such carbon credits are to be transferred to the Government of Rwanda to help achieve its nationally determined emission reduction targets, and 5% of revenues generated from the initial sale of the remaining Article 6 Authorized labeled issued carbon credits will be remitted to the RGF.

In April 2024, BCCPC and DelAgua executed an amended and restated project agreement to facilitate the implementation of the LOA. Following execution of this agreement, in April 2024, the Company received its first carbon credits generated from the project when DelAgua transferred 717,558 carbon credits which have been tagged by Verra with an Article 6 Authorized label. There was a corresponding increase in carbon credit inventory arising from the receipt of the carbon credits.

Under the terms of the revised project agreement, BCCPC will contribute $0.20 per carbon credit to RGF for the first 1,925,000 carbon credits and the parties will split the 5% RGF remittance attributable to sales revenue from remaining Article 6 Authorized labeled carbon credits, based upon each party's pro rata share of cashflows from each carbon credit sale. Article 6 Authorized labeled carbon credits received by the parties pursuant to the Rwanda cookstoves project agreement will be net of the 12% volume reduction outlined in the LOA. Therefore, assuming all carbon credits from the Rwanda cookstoves project are issued with an Article 6 Authorized label, a revised aggregate minimum of approximately 6.6 million carbon credits would be subject to a revenue sharing arrangement between BCCPC and DelAgua.

In December of 2024, the Company and DelAgua made the decision that the new cookstove project methodology VM0050, recently published by Verra, the project registry, should be evaluated for the project in order to be eligible for carbon credit sales into compliance programs like the Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA") as well as to expand other sales channels. The transition to the VM0050 methodology will require a re-quantification of the credits expected to be generated from the project.

The table below summarizes the changes in the Rwanda Cookstoves Project during the year ended December 31, 2024, and the year ended December 31, 2023:

Rwanda Cookstoves Project	December 31, 2024	December 31, 2023
Balance, beginning of the period	$ 8,825,000	$ 8,450,000
Capital deployed in the project during the period	-	375,000
Unrealized gains on investment in carbon credit projects	24,619,381	-
Receipt of carbon credit inventory	(25,632,656)	-
Balance, end of the period	$ 7,811,725	$ 8,825,000

Unrealized gains on investment in Rwanda Cookstoves Project

During the year ended December 31, 2024, the Company determined that once the project began issuing credits, the valuation technique for the Rwanda Cookstoves Project should be changed from the cost approach to the income approach. The income approach uses a discounted cash flow ("DCF") model, totalling the future discounted after-tax cashflows from the lifetime of the project. The Company considers the income valuation technique to be the most relevant and reliable in representing the fair value of the Rwanda Cookstoves Project now that the project has issued carbon credits.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

The carbon credit price, carbon credit volumes and discount rates are considered to be unobservable inputs which the Company has determined to have the most significant impact on the valuation of the investment.

i) Carbon Credit Price

As at December 31, 2024, a price of $18.60 per carbon credit was used for the duration of the DCF forecast period, which was determined with reference to recent market sale transactions of carbon credits, and a published futures option quote for carbon credits, with similar characteristics, including an Article 6 Authorized label.

ii) Carbon Credit Volumes:

With the anticipated implementation of the new VM0050 methodology, and factoring in the impact of the LOA with the Government of Rwanda, it is currently estimated that the project would generate approximately an aggregate of 3.4 million carbon credits.

Failing to meet these projected carbon credit volumes, including further changes to the project methodology resulting in lower crediting volumes or future pricing will result in significant impairment to the investment value, resulting in reversal of unrealized gains.

iii) Discount Rate:

A discount rate of 15% is used for the project.

The discount rate accounts for conditions and risk factors of the project, including:

Methodology risk relating to carbon reduction and removal projects
Uncertainty of carbon credit volumes
Uncertainty of carbon credit price and market conditions
Foreign operations and political risk

Refer to the DCF model sensitivity analysis below for details on each inputs' impact on the financial statements.

During the twelve months ended December 31, 2024, carbon credits were issued from the Rwanda Cookstoves Project, and a portion were sold to a third party, resulting in a project valuation update from the cost approach to the income approach and use of the DCF model. This resulted in an unrealized gain of $24,619,381 during the year. Further, $25,632,656, the amount equal to the fair market value of issued carbon credits on the date received by BCCPC, was transferred from the current investment balance and recognised as the value of carbon credit inventory.

Current and non-current investment balance for the Rwanda Cookstoves Project

As at December 31, 2024, the current balance of the investment in the Rwanda Cookstoves Project was $2,723,478. This investment balance represents the discounted after-tax cashflows expected to be received within the next twelve months of the balance sheet date.

As at December 31, 2024, the non-current balance of the investment in the Rwanda Cookstoves Project was $5,088,247. This investment balance represents the discounted after-tax cashflows of the project expected to be received beyond the next twelve months of the balance sheet date.

This was a net decrease of $1,013,275 in total valuation of the Rwanda Cookstoves Project during the twelve months ended December 31, 2024, when compared to the investment balance of $8,825,000 as at December 31, 2023,

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

As at December 31, 2023, the project remained at pre-issuance phase, and the fair value of the investments in carbon projects approximates the aggregate capital expenditures disbursed of $8,825,000 and is categorized as a non-current asset. The fair value assessment of the Rwanda Project has taken into consideration the contractual terms of the underlying project agreements, operating milestones for each project, recent trading prices for comparable carbon credit methodologies and vintages, contractual sale agreements and overall market volatility of voluntary carbon credit pricing for year ended December 31, 2023.

There is limited market or observable market data for the investments in carbon credit projects, and it is classified as Level 3 in the fair value hierarchy. During the twelve months ended December 31, 2024 and 2023, there were no transfers of assets between Level 1, Level 2 and Level 3 for the Rwanda Cookstove Project.

Vietnam Household Devices Project

On May 27, 2022, the Company, through BCCPC, entered into transaction documents to facilitate the development of a cookstove and water purifier carbon reduction project in the country of Vietnam with Sustainability Investment Promotion and Development Joint Stock Company ("SIPCO"), as in-country project developer. Citigroup Global Markets Limited ("Citigroup") is the carbon credit off-taker to SIPCO for the Vietnam Household Devices Project. BCCPC has fully funded its capital commitment of $20,828,600 used to fund the manufacturing, distribution and monitoring of approximately 850,000 cookstoves and 364,000 water purifiers across several provinces of Vietnam. The distribution of the household devices was completed in February 2023. BCCPC has the option to expand the project to an aggregate total of 1,200,000 cookstoves and 600,000 water purifiers for an additional prepayment.

Project documentation provides that during the initial project carbon credit generation phase ("Phase 1") SIPCO will sell and transfer to BCCPC, and SIPCO will then buy back from BCCPC the first 7.4 million carbon credits for subsequent offtake by Citigroup pursuant to a fixed price off-take arrangement ("Citigroup"). BCCPC has the option to purchase all additional carbon credits generated by the project on a yearly basis for $5 per carbon credit ("Phase 2").

During the twelve months ended December 31, 2024, BCCPC deployed $1,651,693 in capital towards the project after relevant project milestones were fulfilled by SIPCO. Capital deployed also includes carbon credit issuance levy fees paid to Verra. Contractually obligated capital for the project was fully deployed in the year.

During the twelve months ended December 31, 2024 and 2023, carbon credits were issued and settled for cash, as detailed under the heading "Realized cash settled gains on investment in the Vietnam Household Devices Project".

Verra, the project registry, has published an updated methodology for cookstove projects, VM0050. Transition to this methodology will require a re-quantification of the credits to be generated from this project for 2025 carbon credit vintages onward. Based on the implementation of this updated methodology, the project is currently estimated to generate an aggregate of approximately 17.5 million credits. If the option to expand the project is exercised by BCCPC, an additional 6.1 million carbon credits are estimated to be generated over a 10-year period following implementation of the project expansion. Prior to the methodology update, the project was estimated to generate approximately 38.3 million credits, as of December 31, 2023.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

The table below summarizes the changes in the Vietnam Household Devices Project during the years ended December 31, 2024 and 2023:

Vietnam Household Devices Project	December 31, 2024	December 31, 2023
Balance, beginning of the period	$ 123,861,241	$ 16,021,230
Capital deployed in the project during the period	1,651,693	3,155,788
Unrealized (loss) gain on investment in carbon credit projects	(69,540,591)	104,684,223
Realized cash settled gains on investment in carbon credit projects	28,027,107	6,418,271
Settlements of investment in carbon credit projects	(28,027,107)	(6,418,271)
Balance, end of the period	$ 55,972,343	$ 123,861,241

Realized cash settled gains on investment in the Vietnam Household Devices Project

During the year ended December 31, 2024, BCCPC received an aggregate of $28,027,107 of cash payments from the delivery and monetization of carbon credits from the Vietnam project representing both a realized gain, as well as an amount derecognized from the financial asset balance of the investment for the twelve months ended December 31, 2024.

During Phase 1 of the Vietnam Household Devices Project, the Company's fully funded capital commitment of $20,828,600 resulted in a prepayment cost of approximately $4 per carbon credit. During the twelve months ended as of December 31, 2024, the Company received net cash payments of $28,027,107 at a total cost of $16,363,716, resulting in a cash gain of $11,663,391 during the period.

Since the establishment of the project and as of December 31, 2024, the Company has received aggregate cash payments of approximately $34.4 million from the sale of carbon credits generated by the project at a total cost of $20.8 million resulting in a full repayment of capital and an initial cash gain of approximately $13.6 million.

Unrealized (losses) gains on investment in Vietnam Household Devices Project

The Company reviewed and revalued the investment in the Vietnam Household Devices Project as of December 31, 2024, taking into account inputs such as expected carbon credit volumes generated based upon the implementation of Verra's updated methodology in 2025, carbon credit prices, discount rates, and discounted cashflow valuation of the project expansion option. These inputs are considered to be unobservable inputs which the Company has determined to have the most significant impact on the valuation of the investment.

i) Carbon Credit Price:

Excluding the fixed off-take volumes of 7.4 million carbon credits for Phase 1 of the project, and those credits under Phase 2 which are expected to be issued in the second quarter 2025, and are valued at $6.00 per credit, as at December 31, 2024, a price of $18.60 per carbon credit was used for the duration of the DCF forecast period, which was determined with reference to recent market sale transactions of carbon credits, and a published futures option quote for carbon credits, with similar characteristics, including an Article 6 Authorized label.

ii) Carbon Credit Volumes:

During Phase 1 of the project, from 2023 to 2025, the project is expected to generate 7.4 million carbon credits.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

During Phase 2 of the project, from 2025 to 2032, and based on the latest project monitoring reports, the project design document, the implementation of Verra's updated project methodology in 2025 among other factors including expected use of cookstoves and water purifiers by participating households and the performance of such devices, the project is projected to generate an estimated 10.1 million carbon credits.

During the expansion option of the project, from 2025 to 2036, and based on the latest project monitoring reports, the project design document, the implementation of Verra's updated project methodology in 2025, among other factors including expected use of cookstoves and water purifiers by participating households and the performance of such devices, the project is projected to generate an estimated 6.1 million carbon credits.

Failing to meet these projected carbon credit volumes, including due to further changes to the project methodology resulting in a reduction of forecasted carbon credit volumes, a potential implementation of Verra's updated project methodology prior to 2025, and a reduction in prices in the future will result in significant impairment to the investment value, resulting in losses of unrealized gains.

iii) Discount Rates:

During Phase 1 of the project, from 2023 to 2025, the discount rate used is 8%.

During Phase 2 of the project, from 2025 to 2032, the discount rate used is 15%.

During the expansion option of the project, from 2025 to 2036, the discount rate used is 20%.

The discount rates account for conditions and risk factors of the project, including:
- Methodology risk relating to carbon reduction projects
- Uncertainty of carbon credit volumes
- Uncertainty of carbon credit price and market conditions
- Foreign operations and political risk

Refer to the DCF model sensitivity analysis for details on each inputs' impact on the financial statements.

Current and non-current investment balance for the Vietnam Household Devices Project

As at December 31, 2024, the current balance of the investment in the Vietnam Household Devices Project was $6,092,972 ($34,813,455 as at December 31, 2023). This balance represents the discounted after-tax cashflows of the project expected to be received within the next twelve months of the balance sheet date.

As at December 31, 2024, the non-current balance of the investment in the Vietnam Household Devices Project was $49,879,371 ($89,047,786 as at December 31, 2023). This balance represents the discounted after-tax cashflows of the project expected to be received beyond the next twelve months of the balance sheet date.

As at December 31, 2024, the project was valued at $55,972,343. This was a decrease of $67,888,898 from December 31, 2023. $28,027,107 of this decrease was a result of cash received from the delivery and monetization of carbon credits and corresponding derecognition of the financial asset. This was offset by an increase in balance sheet carrying value associated with the final $1,651,693 in capital deployed toward the project during the twelve months ended December 31, 2024.

There is limited market or observable market data for the investments in carbon credit projects, and it is classified as Level 3 in the fair value hierarchy. For the year-ended December 31, 2024, there were no transfers of assets between Level 1, Level 2 and Level 3 for the Vietnam Household Devices Project.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

DCF model sensitivity analysis

The Company considers carbon credit price, carbon credit volumes, and the discount rates used in the DCF model as the main inputs impacting the valuation of the investments in the Rwanda and Vietnam projects. Based on a 1% increase or decrease in each of the inputs when compared to the base case inputs used in the DCF model, the Company's valuation would have the following estimate impacts on net income as at December 31, 2024:

Key Input and Change in Assumptions	Impact on Net Income as at December 31, 2024
	Rwanda Cookstoves Project	Vietnam Household Devices Project
Carbon credit price input increased by 1%	$86,437 increase in net income and total assets	$568,123 increase in net income and total assets
Carbon credit price input decreased by 1%	$86,437 decrease in net income and total assets	$568,123 decrease in net income and total assets
Carbon credit volume input increased by 1%	$67,247 increase in net income and total assets	$539,491 increase in net income and total assets
Carbon credit volume input decreased by 1%	$67,247 decrease in net income and total assets	$539,491 decrease in net income and total assets
Discount rates input increased by 1%	$25,710 decrease in net income and total assets	$354,276 decrease in net income and total assets
Discount rates input decreased by 1%	$25,884 increase in net income and total assets	$357,749 increase in net income and total assets

India Afforestation, Reforestation, and Revegetation (ARR) Project

As announced on August 8, 2023, the Company, through BCCPC, entered into an agreement to facilitate the development of a nature-based carbon removal project, focused on the reforestation of degraded rural farmlands in the northern Indian state of Uttar Pradesh. Value Network Ventures Advisory Services Pte Ltd. ("VNV") is the Company's Project development partner.

The project's aim is to facilitate the planting of approximately 6,500,000 trees on rural farmlands and deserted lands in northern India, and the planting of all project trees was completed during the year ended December 31, 2024. The project is expected to generate an estimated 1,600,000 nature-based removal carbon credits issued over an expected 20-year project life.

Per the terms of the agreement and assuming all condition precedents are met, BCCPC would invest an aggregate of roughly $9.2 million by the end of 2024, of which BCCPC has invested $6.1 million as of December 31, 2024. The Company will subsequently invest roughly $4.4 million of maintenance capital expenditure by the end of 2032, expected to be funded through the sale of carbon credits generated by the project.

The table below summarizes the changes in the India ARR Project during the years ended December 31, 2024 and 2023:

India ARR Project	December 31, 2024	December 31, 2023
Balance, beginning of the period	$ 4,400,000	$ -
Capital deployed in the project during the period	1,700,000	4,400,000
Balance, end of the period	$ 6,100,000	$ 4,400,000

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

During the year ended December 31, 2024, $1,700,000 in capital was deployed towards the project. As the India ARR Project remains in the developmental stage and is pre-issuance of carbon credits, the project's fair value continued to be approximated by its cost basis as at December 31, 2024.

9. Investments at fair value

Denominator Collective LLC

During the year ended December 31, 2024, the Company, through BCCPC, invested $85,000 for the rights to future equity in Denominator Collective LLC, a Limited Liability Company based in Delaware, USA. As at December 31, 2024, the Company assessed that based on the latest information of Denominator Collective LLC, the carrying value shall remain the initial investment of $85,000.

For the year ended December 31, 2024, there were no transfers of assets between Level 1, Level 2 and Level 3.

ACX Holdings

As at December 31, 2024, the Company evaluated its fair value investment in ACX Holdings. Based on operating financial results, commercial transactions, and share capitalization, the Company determined that based on declining operating financial results of ACX Holdings, a loss on investments at fair value was warranted. As a result, a loss on investments at fair value of $1,441,163 was recognized during the period, resulting in a complete write-down of the Company's investment in ACX Holdings.

For the year ended December 31, 2024, there were no transfers of assets between Level 1, Level 2 and Level 3.

Hardwick Climate Business Limited

On April 27, 2023, the Company and HCBL agreed to terms whereby the Company purchased the remaining 22% of outstanding shares of BCCPC from HCBL, in exchange for $2,996,000 in total consideration. On May 10, 2023, the consideration of (i) $1,600,000 was paid in cash, and (ii) a promissory note payable to HCBL for $1,396,000, was issued and cancelled upon the Company reducing its equity ownership in HCBL from 49.9% to 15%.

As a result of the restructuring which closed on May 10, 2023, the Company discontinued the equity method of accounting for its investment in associate, HCBL. The fair value measured and recognized as the Company's investment in HCBL post restructuring was $600,000. During the year ended December 31, 2023, the Company assessed that based on operating financial results, commercial transactions, and share capitalization, no further changes to the fair value were necessary. The balance of the investment in HCBL as at December 31, 2023, was $600,000.

For the year ended December 31, 2023, $600,000 in fair value of HCBL was transferred into Level 3 of the Company's fair value hierarchy balance. Refer to details of the Company's fair value hierarchy and disclosure in Note 15 - Risk Management.

During the year ended December 31, 2024, the Company assessed that based on declining operating financial results of HCBL, particularly with its profitability and cashflow, a loss on investments at fair value was warranted. As a result, a loss on investments at fair value of $600,000 was recognized during the period, resulting in a complete write-down of the Company's investment in HCBL. There were no other notable commercial transactions, and no changes to HCBL's share capital during the period.

For the year ended December 31, 2024, there were no transfers of assets between Level 1, Level 2 and Level 3.

Base Carbon Inc.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

(Expressed in United States Dollars)

10. Income tax expense, income tax liability, and deferred income tax liability

During the year ended December 31, 2024, the Company incurred a total income tax expense of $2,205,585. Of this income tax expense, $936,708 represented the current income tax, and $1,268,877 represented the deferred tax. For the year ended December 31, 2023, $8,311 represented the current income tax, and $5,984,381 represented the deferred tax.

In 2024, the current income tax arose from the net taxable income incurred during the year. Deferred tax liability of $1,268,877 arose primarily from the unrealized gain on the investment in the Rwanda Cookstoves Project.

(a) Provision for income taxes

The income tax expense differs from the amount resulting from the application of the combined Canadian statutory income tax rate as follows:

	Years ended December 31,
	2024	2023
Consolidated net (loss) income before tax	$ (26,699,701)	$ 104,266,545
(Recovery) taxes at the combined Canadian federal and provincial tax rates	(7,075,421)	27,630,634
Increase (decrease) as a result from:
Change on enacted tax rate	3,808,243	-
Deferred tax asset not recognized	912,424	569,159
Tax rate differences due to foreign subsidiaries	3,503,327	(22,614,454)
Foreign exchange	479,154	-
Others	577,858	407,353
Consolidated effective income tax	$ 2,205,585	$ 5,992,692

The Company has $912,424 in tax benefits not recognized for the year ended December 31, 2024 ($569,159 tax benefits not recognized for the year ended December 31, 2023).

(b) Recognized deferred tax liability

	December 31, 2024	December 31, 2023
Capital losses carried forward – Canada	$ -	$ 50,819
Non-capital losses carried forward – Foreign	-	18,943
Investment in Carbon Credit Projects	(5,661,014)	(6,003,311)
Carbon credit inventory	(1,600,493)	-
Investment in ACX Holdings	-	(50,819)
Other	8,262	-
Total recognized deferred tax liability	(7,253,245)	(5,984,368)

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

Deferred taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. Deferred tax assets have not been recognized in respect of the following unrecognized deductible temporary differences.

	December 31, 2024	December 31, 2023
Non-capital losses carried forward - Canada	$ 15,787,674	$ 11,968,627
Net operating losses carried forward - Foreign	-	107,738
Capital losses carried forward - Canada	8,488,713	5,957,596
Investments	1,558,314	2,805,591
Undeducted financing fee	1423,668	2,392,593
Accrued interest	228,198	-
Others	33,679	116,651
Total unrecognized deductible temporary difference	$ 27,520,246	$ 23,348,796

(d) Capital and Non-capital losses

The Company has capital losses of $8,488,713 which can be carried forward indefinitely to offset against capital gains.

The Company has Canadian non-capital losses of $15,787,674 which can be carried forward twenty years and expires by 2044.

Share capital

Common shares issued are as follows:

	Number of Common Shares	Share Capital
Balance, December 31, 2022	123,339,602	$ 53,337,621
Shares repurchased and cancelled under NCIB (d)	(4,983,920)	(1,749,808)
Other Shares repurchased and cancelled (e)	(437,500)	(139,654)
Balance, December 31, 2023	117,918,182	$ 51,448,159
	Number of Common Shares	Share Capital
---	---	---
Balance, December 31, 2023	117,918,182	$ 51,448,159
Shares repurchased and cancelled under NCIB (d)	(8,695,696)	(2,939,438)
Exercise of options (c)	13,000	5,185
Balance, December 31, 2024	109,235,486	$ 48,513,906

Common Shares

(a) Authorized

Unlimited number of common shares without par value.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

(b) Issued

13,000 common shares were issued upon the exercise of stock options during the year ended December 31, 2024. No shares were issued during the year ended December 31, 2023.

(c) Exercised

During the year ended December 31, 2024, a total of 13,000 stock options were exercised for a total consideration of $5,185. No options were exercised for shares during the year ended December 31, 2023.

(d) Repurchased and cancelled under NCIB

Pursuant to a normal course issuer bid ("NCIB"), Base Carbon was authorized to purchase, from time to time, over a period of 12 months beginning June 17, 2022, and ending June 16, 2023, up to 8,716,601 Common Shares representing approximately 7% of the total 127,663,680 issued and outstanding Common Shares and 10% of the Company's public float as of June 16, 2022. On any given day during the NCIB, Base Carbon was authorized to purchase up to 105,626 Common Shares, which was equivalent to 25% of the average daily trading volume prior to commencement of the NCIB. Block trades for a greater number of Common Shares may be made once per calendar week.

For this first NCIB period, Base Carbon purchased a cumulative 7,370,778 Common Shares for cancellation under the NCIB, of which 3,046,700 were purchased and cancelled during the year ended December 31, 2023.

On June 21, 2023, the Company renewed its NCIB. Base Carbon may purchase over a period of 12 months beginning June 21, 2023, and ending June 20, 2024, up to 7,974,471 Common Shares representing approximately 6.6% of the total 121,108,302 issued and outstanding Common Shares and 10% of the Company's public float as of June 9, 2023. On any given day during the NCIB, Base Carbon may purchase up to 14,678 Common Shares which is equivalent to 25% of the average daily trading volume of 58,713 for the previous six months, which excludes purchases made under the current normal course issuer bid. Block trades for a greater number of Common Shares may be made once per calendar week.

For this second NCIB period, Base Carbon purchased a cumulative 1,937,220 Common Shares for cancellation under the NCIB, all of which were purchased and cancelled during the year ended December 31, 2023.

On June 21, 2024, the Company renewed its' established normal course issuer bid ("NCIB") pursuant to which it is authorized by Cboe Canada to purchase, from time to time, over a period of 12 months beginning June 21, 2024, and ending June 20, 2025, up to 7,571,314 Common Shares.

During the year ended December 31, 2024, the Company purchased and cancelled 8,695,696 of its Common Shares, pursuant to its previously established and renewed NCIB.

(e) Other repurchased and cancelled

Other than pursuant to the NCIB, no other common shares were repurchased and cancelled during the year ended December 31, 2024.

Pursuant to a share purchase agreement with a company shareholder dated September 22, 2023, the Company purchased, and then cancelled, 437,500 shares at $0.3192 per share, for a total purchase consideration of $139,654.

Base Carbon Inc.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

(Expressed in United States Dollars)

12. Contributed surplus stock options

The contributed surplus of the company includes excess capital from share sales and other shareholder transactions, including proceeds from issuing stock options. As at December 31, 2024, the Company had the following outstanding stock options:

	Number of stock options	Weighted average exercise price
Balance, December 31, 2022	7,340,000	$ 0.61
Granted during the period	1,040,000	$ 0.72
Forfeited during the period	(1,208,334)	$(0.76)
Balance, December 31, 2023	7,171,666	$ 0.60
Balance, December 31, 2023	7,171,666	$ 0.60
Granted during the period	4,145,000	$0.54
Exercised during the period	(13,000)	($0.17)
Forfeited during the period	(995,000)	$(0.66)
Balance, December 31, 2024	10,308,666	$ 0.56

During the year ended December 31, 2024, 4,145,000 options were granted to staff members, directors and a consultant, with a weighted average exercise price of $0.54. During the same period, 995,000 options were forfeited with a weighted average exercise price of $0.66, and 13,000 stock options were exercised for a total consideration of $5,185. The weighted average exercise price per option outstanding as at December 31, 2024, was $0.56.

As at December 31, 2024, 6,862,007 options outstanding were fully vested and exercisable, with a weighted average exercise price of $0.57, while 3,446,659 options outstanding had not yet vested, with a weighted average exercise price of $0.57. The total outstanding options as at December 31, 2024 have exercise prices ranging from $0.20 to $0.78, with a weighted average remaining contractual life of 1.98 years.

During the year ended December 31, 2023, 1,040,000 options were granted to staff members and a consultant, with a weighted average exercise price of $0.72. There were 1,208,334 options forfeited during the same period, and any adjustments to the fair value of the options and shared-based compensation was recognized in the period. There were no options exercised during the year ended December 31, 2023.

As at December 31, 2023, 4,368,340 options outstanding were fully vested and exercisable, with a weighted average exercise price of $0.54, while 2,803,326 options outstanding had not yet vested, with a weighted average exercise price of $0.70. The total outstanding options as at December 31, 2023 have exercise prices ranging from $0.20 to $0.78, with a weighted average remaining contractual life of 2.3 years.

The fair value of share-based awards is determined using the Black-Scholes Option Pricing Model. The model utilizes certain subjective assumptions including the expected life of the option and expected future stock price volatility. Changes in these assumptions can materially affect the estimated fair value of the Company's stock options. The Company used the Black-Scholes Option Pricing Model for its stock options granted.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

The following Black-Scholes model inputs were used for option tranches granted in respective periods:

	Year Ended December 31, 2024	Year Ended December 31, 2023
Risk-free interest rate	4%	3%
Exercise prices	$0.362 - $0.725	$0.371 - $0.747
Expected life of the option – employees & consultants	3 years	3 years
Expected life of the option – officers	3 years	3 years
Expected life of the option – directors	3 years	3 years
Expected dividend per share	$nil per share	$nil per share
Expected volatility of the Company's shares	47.3%	78.2%

Goods or services received or to be received by the entity need to be provided by the stock option grantees in its capacity as a supplier of goods or services. If the goods or services are provided by a counterparty in its capacity as a shareholder, then the transaction is not a share-based payment transaction. The options have vesting periods based on conditions of goods or services provided being met over time. The granted and vested options expire at the earlier of one year from the date of the termination of goods or services provided to the Company, and four years from the grant date.

The weighted average fair value of options granted during the period was $0.07 per option.

During the year ended December 31, 2024, the share-based compensation expense was $162,035 ($326,376 during the year ended December 31, 2023).

13. (Loss) income per share

For the year ended December 31, 2024, basic and diluted (loss) per share has been calculated based on the net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted income per share for the year ended December 31, 2023 includes the exercise of stock options that are in-the-money, as shown below.

	December 31, 2024	December 31, 2023
Basic (loss) income per common share
Net (loss) income attributable to common shareholders	$ (28,905,286)	$ 98,273,853
Weighted average number of common shares outstanding	114,879,977	120,581,036
Basic (loss) income per common share	$ (0.25)	$ 0.82
Diluted (loss) income per common share
Net (loss) income attributable to common shareholders	$ (28,905,286)	$ 98,273,853
Weighted average number of common shares outstanding	114,879,977	120,581,036
Adjustments to average shares due to stock options and others	-	346,534
Weighted average number of diluted common shares Outstanding	114,879,977	120,927,570
Diluted (loss) income per common share	$ (0.25)	$ 0.81

14. Capital management

The Company manages its capital with the following objectives:

to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth opportunities, and pursuit of accretive acquisitions; and

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

to maximize shareholder return through enhancing the share value.

The Company monitors its capital structure and adjusts according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is reviewed by the Company's management and the Board of Directors on an ongoing basis.

The Company considers its capital to be shareholders' equity, being comprised of share capital, contributed surplus, and retained earnings, which totaled $103,008,430 as at December 31, 2024.

The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities. There were no changes in the Company's approach to capital risk management during the year ended December 31, 2024, and the Company is not subject to any externally imposed capital requirements.

15. Fair Value and Risk Management

Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are categorized into levels within a fair value hierarchy based on the nature of valuation inputs (Level 1, 2 or 3).

The fair value hierarchy has the following levels:

Level 1 – quoted prices represent unadjusted quoted prices for identical instruments exchanged in active markets.
Level 2 – significant other observable inputs includes directly or indirectly observable inputs, other than quoted prices for identical instruments exchanged in active markets.
Level 3 – significant unobservable inputs include inputs that are not based on observable market data.

The fair value of financial assets and financial liabilities are considered to be their carrying value when they are of short duration or when the instrument's interest rate approximates current observable market rates. The fair value of cash and cash equivalents, short term investment, related party receivable and other receivables approximates their carrying amounts due to the relatively short period to maturity.

The fair value of the Company's investment in carbon credit projects is calculated based on a discounted cash flow method for both the Vietnam Household Devices Project and the Rwanda Cookstoves Project, and approximated by its cost for the India ARR Project (refer to Note 7 – Investments in Carbon Credit Projects).

Where other financial assets and financial liabilities are of longer duration, then fair value is determined using the discounted cash flow method using discount rates based on adjusted observable market rates.

Base Carbon Inc.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

(Expressed in United States Dollars)

The following table illustrates the classification of the Company's consolidated financial instruments within the fair value hierarchy as at December 31, 2024, according to the significance and reliability of the inputs used in determining fair value measurements. There were no transfers of assets between Level 1, Level 2 and Level 3.

	Level 1	Level 2	Level 3	Total
Cash and cash equivalents	$ 14,798,726	$ -	$ -	$ 14,798,726
Short term investments	41,687	-	-	41,687
Related party receivable	-	1,464,274	-	1,464,274
Other receivables	18,997	-	-	18,997
Investments at fair value	-	-	85,000	85,000
Current investments in carbon credit projects	-	-	8,816,450	8,816,450
Non-current investments in carbon credit projects	-	-	61,067,618	61,067,618
Accounts payable and accrued liabilities	(806,044)	-	-	(806,044)
	$ 14,053,366	$ 1,464,274	$ 69,969,068	$ 85,486,708

The following table illustrates the classification of the Company's consolidated financial instruments within the fair value hierarchy as at December 31, 2023, according to the significance and reliability of the inputs used in determining fair value measurements. During the year ended December 31, 2023 $600,000 was transferred into Level 3 of fair value hierarchy for the Company's investment in HCBL. During the year, $425,954 was added into Level 2 of the fair value hierarchy for the Company's loan issued to Abaxx. There were no other transfers of assets between Level 1, Level 2 and Level 3.

	Level 1	Level 2	Level 3	Total
Cash and cash equivalents	$ 1,400,682	$ -	$ -	$ 1,400,682
Short term investment	45,237	-	-	45,237
Related party receivable	-	425,954	-	425,954
Other receivables	24,747	-	-	24,747
Investments at fair value	-	-	2,041,163	2,041,163
Current investments in carbon credit projects	-	-	34,813,455	34,813,455
Non-current investments in carbon credit projects	-	-	102,272,786	102,272,786
Accounts payable and accrued liabilities	(451,672)	-	-	(451,672)
	$ 1,018,994	$ 425,954	$ 139,127,404	$ 140,572,352

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations.

The Company's credit risk is attributable to cash and cash equivalents, short term investments, other receivables, prepaid and other assets, related party receivable, and investments in carbon credit projects. Cash and cash equivalents and short-term investment are on deposit with a Canadian chartered bank, from which management believes the risk of loss is remote. Other receivables are due from revenue authorities, from which management believes the risk of loss to be remote. The Company's maximum exposure to credit risk as at December 31, 2024 is the sum of the carrying value of the aforementioned asset accounts.

The Company manages credit risk of the aforementioned asset accounts by:

assessing credit profile and worthiness of and completing due diligence on counterparties prior to agreements.
structuring agreements with defined services or benefits, terms, and remuneration, enforcing the Company's rights from such agreements, and
conducting post disbursement monitoring and executing dispute resolution processes.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

Liquidity risk

The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due, including commitments arising from investments in carbon credit projects. As at December 31, 2024, the Company had current assets of $50,821,662 to settle current liabilities of $1,742,869. $8,816,450 in current investments in carbon credit projects, $25,632,656 in carbon credit inventory, $1,464,274 in related party receivable, $41,687 in short term investments, and $48,872 in prepaid and other assets are not liquid assets. Hence $14,817,723 represents liquid current assets. The ability of the Company to receive cash from current investments in carbon credit projects is dependent on the timing of estimated carbon credit issuances and sales. All of the Company's current financial liabilities have contractual maturities of less than 90 days and are subject to normal trade terms.

Market risk

Market risk is the risk of loss that may arise from changes in market forces including, but not limited to, interest rates, equity prices, voluntary carbon credit prices and foreign exchange.

Foreign currency risk

As at December 31, 2024, the Company is exposed to foreign currency risk with respect to Canadian and Barbadian dollar assets with a total balance of $203,692 ($828,217 in 2023). The Company is also exposed to Canadian and Barbadian dollar denominated liabilities with a total balance of $8,647,326 ($6,383,113 in 2023). Most of this exposure relates to the current and deferred tax liability amount of $8,154,364, which is the estimate income tax on current and future proceeds from the sale of carbon credits.

Sensitivity analysis

The Company is exposed to foreign currency risk on fluctuations of financial instruments related to cash and cash equivalents, short term investments, other receivables, and accounts payable and accrued liabilities, and current and deferred tax liabilities.

As at December 31, 2024, the net income would have decreased by $422,182 ($824 in 2023), had the United States and Barbados dollar strengthened by 5%. Had the US and Barbados dollar weakened by 5% at December 31, 2024, the net income would have increased by $422,182 ($824 in 2023).

These changes are based on the results of foreign exchange gains/losses on translation of financial instruments related to cash and cash equivalents, investments, and accounts payable and accrued liabilities.

16. Related party transactions

Related parties of the Company include the Board of Directors, senior management, close family members and enterprises that have significant ownership of the Company or that are controlled by these individuals as well as certain persons performing similar functions.

Related party transactions conducted in the normal course of operations are measured at exchange value. Senior management is defined as those with authority and responsibility for planning, directing, and controlling activities of the Company, including directors and the executive team.

Management and Directors Compensation

During the year ended December 31, 2024, key management and directors received $2,046,942 in cash compensation, and $185,299 in share-based compensation from the Company. In the same period, 3,250,000 stock options were granted to senior management and directors.

Base Carbon Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2024 and 2023
(Expressed in United States Dollars)

During the year ended December 31, 2023, key management and directors received $1,385,172 in cash compensation, and $178,343 in share-based compensation from the Company. In the same period, 440,000 stock options were granted to senior management staff members. Further, 116,667 stock options were forfeited by a director of the Company.

Abaxx Technologies Inc.

Abaxx is a related party to the Company as a result of the board of directors of the companies having two directors in common and Abaxx's significant ownership of common shares of the Company.

During the year ended December 31, 2024, the Company was invoiced approximately $262,155 from Abaxx for marketing, promotional and consulting services provided to the Company, for which there was part settlement. The expense for these services was $307,855 during the year ended December 31, 2023.

Refer to Note 5 for details regarding royalty fees paid to Abaxx and the advance of two loans to Abaxx. Refer to Notes 5 and 18 for details regarding the share purchase agreement entered into between the parties.

17. Commitments

India ARR Project payments

With respect to the India ARR Project, BCCPC has, subject to conditions and achievement of project milestones, contractual commitments to make aggregate payments totalling $13,621,033 in various tranches over the life of the project. As December 31, 2024, the remaining contractual commitments were $7,521,033. These payments are anticipated to be due by October 2032, staged, partially funded by anticipated future carbon credit sales proceeds, and based on various conditions precedent / project milestones. Refer to Note 8 - Investments in carbon credit projects - India Afforestation, Reforestation, and Revegetation (ARR) Project for more information.

The Company had no other material contractual payment commitments as at December 31, 2024.

18. Subsequent events

In December 2024, the Company and Abaxx entered into a share purchase and sale agreement whereby the Company agreed to purchase such number of the Company's common shares owned by Abaxx. The purchase price was paid by the Company prior to the transaction closing and was subsequently returned to the Company in connection with the termination of transaction by Abaxx in January 2025.

In March 2025, the Company received a cash settlement of $789,621 from the delivery and monetization of the latest water purifier carbon credits issued from the Vietnam Household Devices Project.

AI assistant

Base Carbon — Audit Report / Information 2024

48096_rns_2025-03-31_8fca93d6-c241-4779-9eea-099a50d8919a.pdf

basecarbon

BASE CARBON INC.

INDEPENDENT AUDITOR'S REPORT

Opinion

Basis for Opinion

Key Audit Matters

Evaluation of the fair value of investments in carbon credit projects related to the Vietnam Household Devices Project and the Rwanda Cookstoves Project

Description of the matter

Why the matter is a key audit matter

How the matter was addressed in the audit

Evaluation of the net realizable value of carbon credit inventory

Description of the matter

Why the matter is a key audit matter

How the matter was addressed in the audit

Other Information

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Auditor's Responsibilities for the Audit of the Financial Statements

1. Nature of operations

2. Basis of preparation

3. Material accounting policies

4. Short-term investments

5. Related party receivable

Abaxx Technologies Inc.

6. Prepaid and other assets

7. Carbon credit inventory

8. Investments in carbon credit projects

Categorization of current and non-current investment balances in carbon credit projects

Rwanda Cookstoves Project

Unrealized gains on investment in Rwanda Cookstoves Project

Vietnam Household Devices Project

Realized cash settled gains on investment in the Vietnam Household Devices Project

Unrealized (losses) gains on investment in Vietnam Household Devices Project

DCF model sensitivity analysis

India Afforestation, Reforestation, and Revegetation (ARR) Project

9. Investments at fair value

Denominator Collective LLC

ACX Holdings

Hardwick Climate Business Limited

10. Income tax expense, income tax liability, and deferred income tax liability

(a) Provision for income taxes

(b) Recognized deferred tax liability

(b) Issued

(c) Exercised

(d) Repurchased and cancelled under NCIB

(e) Other repurchased and cancelled

12. Contributed surplus stock options

13. (Loss) income per share

14. Capital management

15. Fair Value and Risk Management

Fair value

Credit risk

Liquidity risk

Market risk

Foreign currency risk

Sensitivity analysis

16. Related party transactions

Management and Directors Compensation

Abaxx Technologies Inc.

17. Commitments

India ARR Project payments

18. Subsequent events

More from Base Carbon

Base Carbon Audit Report / Information 2024